Global gold prices rose on Tuesday, driven by a weaker US dollar. This comes as traders await whether President-elect Donald Trump’s tariff plans will be more flexible than expected. Investors are also awaiting US jobs data to gauge future interest rate trends set by the Federal Reserve.
“Gold prices managed to stabilize despite a slight decline in the US dollar overnight. However, higher US Treasury yields may continue to put pressure on future gains in XAU,” said IG Markets Strategist Yip Jun Rong.
In this context, the US 10-year Treasury yield hit its highest level since May 2024 on Monday. While the dollar held near its lowest level in a week. The dollar fell against other currencies after a media report indicated that Trump’s advisers were considering imposing tariffs only on sectors that are vital to the US’s economic or national security. However, Trump denied the report, which increased uncertainty about future trade policies.
Gold is known to be a safe haven against uncertainty and inflation. However, rising interest rates are reducing the appeal of the yellow metal, which does not yield any returns.
US Jobs Report on the Horizon
Markets are awaiting the US jobs report due out next Friday. This report could play a major role in shedding light on the future direction of the Federal Reserve’s policy. The US jobs data will also be released today, and is expected to contribute to assessing the economic situation. In addition, the December employment report from ADP, as well as the minutes of the Federal Reserve’s December meeting, will be released on Wednesday.
Gold is witnessing a decline in yesterday’s markets
“The US non-farm payrolls report will be the highlight of the week,” Yep said. “If the unemployment rate remains at 4.2%, it could show that interest rate cuts may be slower than expected, which could help support XAU prices within their current range.”
Last December, the US central bank forecast smaller rate cuts for 2025. Policymakers at the bank have expressed continued concerns about rising inflation rates affecting the US economy.
Gold falls in yesterday’s markets
Gold prices fell for the second straight session on Monday. This came in conjunction with the rise in US 10-year Treasury yields, while markets await important economic data this week from the United States.
At the settlement of Monday’s trading, gold futures for February delivery fell 0.25%, or $7.3, to $2,647.40 per ounce. Despite this decline, gold is still witnessing stable movements compared to the volatility of other markets.
Current gold and dollar trading
At the moment, spot gold prices increased by 0.4%, reaching $2,644.79 per ounce. XAU futures also rose by 0.3%, recording $2,655.00 per ounce.
On the other hand, the dollar index contracts fell by 0.2%, reaching 107.88 points. This decline in the dollar enhances the attractiveness of gold in global markets. The weakness of the dollar contributes to making gold more attractive to foreign investors.
Movement of other precious metals
In addition to gold, other precious metals also witnessed positive movements on Tuesday. Spot silver rose by 0.6%, reaching $30.12 per ounce. Platinum also recorded an increase of 0.6%, reaching $938.55. While palladium rose by 0.4%, reaching $924.52 per ounce.
The role of monetary policy in the markets
The monetary policy followed by the Federal Reserve has a significant impact on the movement of gold prices in global markets. The US Federal Reserve follows a policy of raising interest rates to combat inflation, a move that directly affects the attractiveness of the yellow metal. When interest rates rise, gold becomes less attractive compared to financial instruments that provide fixed returns such as bonds.
But if the Federal Reserve reduces interest rates, gold returns to appear as a safe haven. In this context, investors await any new announcements that may be issued by the Federal Reserve, which may significantly affect the market. The fluctuations we witness in the financial markets reflect a state of caution and anticipation of upcoming decisions.
Gold as an economic indicator
Gold is not only a valuable commodity traded in financial markets. It is also an important economic indicator. Changes in gold prices sometimes reflect investors’ feelings about global economic conditions. In times of economic instability, investors resort to gold as an asset that maintains its value.
With the rise in global concerns about inflation and economic crises, gold remains one of the preferred options for investors seeking to protect their money from market fluctuations.
Gold prices continue to move driven by the fluctuations of the US dollar and market expectations regarding future economic policies. In light of the current economic tensions, traders and investors are awaiting important economic data that may contribute to determining the direction of the markets in the coming days. The Federal Reserve’s monetary policy also plays a pivotal role in determining the attractiveness of gold as a safe investment. Over time, gold remains one of the most prominent financial instruments that traders continue to benefit from in protecting their money in light of changing economic conditions.
